1. 22 June 2017 Oliver Gajda Executive Director
Crowdfunding
22 June 2017
Oliver Gajda
Executive Director

2. Who is ECN and what are our objectives?
The European Crowdfunding Network AISBL (ECN) is a professional industry network
Promoting transparency, (self-) regulation and governance of the crowdfunding industry
Fostering policy discussion and public opinion building
Aiming to increase the understanding of crowdfunding as key support for entrepreneurship
LOBBYING
EDUCATION
RESEARCH
GROWTH
Ongoing dialogue with EU insitutions
Joint statements with fellow trade bodies
Publications
2 annual conferences
Seminars, webinars and workshops
Own research
EC research projects
ECN Code of conduct
Best practices
Transparency
Brussels, 22 June Slide 2

3. Overview Types of crowdfunding
We can differentiate four major types of applications.
Donation: a donor contract without existential reward
Reward: purchase contract for some type of product or service (pre-sales)
Lending: credit/debt contract, principle is being repaid plus interest
Equity: shareholding contract, shares, equity-like instruments or revenue sharing in the project/business, potential up-side at exit
Brussels, 22 June Slide 3

4. Motivation of crowdfunding
Crowdfunding is based on the fact that people want to help other people and projects they like and that are close to them, emotionally or geographically.
Motivation of funders : There are three different motivations for people who want to participate in crowdfunding: social return, material return and financial return.
Motivation of business/project owner : Besides raising money, crowdfunding allows to gain feedback on critical parts of the product before its release into the public marketplace in a short period of time.
Brussels, 22 June Slide 4

5. Value added of crowdfunding
Helps to validate pricing, demand, product design, demographics. It can reduce market research cost while delivering more genuine input
Innovates customer services by aligning motivations between the business and its customers on the same goal. It can establish a common value between the business and the customer
Reduces funding needs in product development, production and ordering by creating efficiences in forcasting. It can help identify priorities and reduce cost of over production/stocking
Empowers consumers to be co-creators and links them directly to the product (business). It can create customer loyalty and word-of-mouth recommendation
Brussels, 22 June Slide 5

6. Risk of crowdfunding
Next to potential benefits, there are also risks attached to crowdfunding
Reputation risk linked to the teams ability to deliver, the performance of a product or service over time (there have been cases of deliberate fraud in the US in reward crowdfunding)
Distrust from customers as to the reasons for crowdfunding - perceived deception
Lack of return on investment, both in financial instruments (equity, debt) and pre-sales (non-delivery or bad quality)
Brussels, 22 June Slide 6

7. Overview RES crowdfunding
About 29 active crowdfunding platforms worldwide in renewables (with to launch)
About 400 projects published (and counting)
Europe (Germany, United Kingdom, Netherlands) starts the sector in 2012
USA following in 2013, since then dramatic growth
Investments in mix of technologies, i.e. solar photovoltaics, wind, biomass, hydropower
Brussels, 22 June Slide 7

8. Crowdfunding for Renewable Energy
The part of the public that has an interest in investing even very small amounts of their savings in renewable energy projects
Brussels, 22 June Slide 8

9. Crowdfunding for Renewable Energy
Community members Other citizens
Brussels, 22 June Slide 9

10. Crowdfunding for Renewable Energy
Intermediaries facilitating the financial transaction between the public and the project developers
Brussels, 22 June Slide 10

11. Crowdfunding for Renewable Energy
Renewable energy project developers whose access to financing is getting more challenging
Brussels, 22 June Slide 11

12. Crowdfunding for Renewable Energy
Commercial developers Cooperatives, Public entities + PPPs, etc
Brussels, 22 June Slide 12

13. What makes a good project?
Large markets - high growth and value above €1bn.
Fast & Rich customers - willing to pay your price and move quickly.
Focus - simple product with a singular value proposition.
Pain killers - the one thing that is of burning importance to your customers and the one and only compelling solution.
Think differently - always reiterate what you are doing, improve
Team DNA - Top level founders attract a top level team and investors
Agility - Stealth and speed will usually help beat-out large companies.
Frugality - Focus spending on critical priorities and maximize profitability.
Inferno - Force discipline and focus.
Brussels, 22 June Slide 13

14. Due diligence of platforms
Identify crowdfunding platforms that cater your needed form of funding, look for those that might have carried projects in your sector previously
Study related projects, both successfull and unsucessfull ones
Closely study the platform (information provided, funding process, fee structrues, legal terms (you might have to register to find these)
Check numbers of projects, funding amounts, success rates, geographic focus and other historic data
Compare the most important KPIs to find the most suitable platform(s)
Decide and consider one or more platforms for your campaign
Brussels, 22 June Slide 14

15. Meeting Platforms (and investors)
Investors relate to your needs, market and business
What are you offering?
What is your committment?
How much are you willing to give up?
Are you able to let go and listen to others?
You should relate to investors by their actual positioning
Geographical location of your project
Development stage of your project and that of the investor
Investment type required or preferred
Your industry sector and specific know-how
Amount you intend to raise at this stage
Feedback from their experience, if and where possible
Brussels, 22 June Slide 15

16. Due diligence of yourself
Agreements/Term sheets - you need to have signed a term sheet prior to the due diligence in most cases (the term sheet sets out the terms of the contract to be entered into if the due diligence is successful).
The due diligence – this will typically involve a set of basic reviews that help characterise your business. These will most certainly always involve:
Evaluation of the management team
Audit of the financial accounts
Evaluation of the technology
Analysis of the intellectual property rights
Evaluating existing customers’ recommendations
Brussels, 22 June Slide 16

17. Valuation
You set your valuation, the crowdfunding platform will however influence you or may have their own method. Depending on the type of finance you are seeking (debt, bond, equity) the methodologies will vary.
Crowdfunding platforms have usually a standard contract to begin with, which can help simplify things; even the best lawyer might not be able to secure your interest at all times and you can be assured that without legal advise you will most likely secure none of your interests.
Brussels, 22 June Slide 17